Solutia noteholders object to exclusivity extension request, cite lack of progress toward consensual plan

By Caroline Salls

Pittsburgh, Feb. 6 - Solutia Inc.'s informal committee of noteholders objected to the company's request for an extension to its exclusive periods to file a plan of reorganization and solicit votes on the plan, saying the company has not made real progress since the last extension was granted, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the objection, the company worked hard in the exclusivity extension motion to create an appearance of progress, "but the substance is lacking."

The committee said after three years in bankruptcy and eight exclusivity extensions, Solutia has failed to reach consensus on a plan.

The noteholders said the reason for lack of progress is that for well before Solutia filed bankruptcy, it pursued a reorganization strategy centered on removing the liens securing noteholders' claims for the benefit of general unsecured creditors and Monsanto "and then prevailing on this court to allow them to get away with it."

In addition, the committee said that in the motion the company talked about a now-public term sheet for a revised plan, which is now more than two months old.

The committee said the term sheet failed to progress the case not only because it "embodied the debtors' continuing failure to acknowledge any real risk to their litigation strategy, but also because it violated the cardinal rule for successful plan negotiations: all parties must share the pain of a compromise."

"The lack of progress toward a consensual plan is a circumstance caused by [the company's] lack of leadership, and is a direct result of the debtors making bad choices followed by worse ones," the committee said in the objection.

Also, the noteholders said it is quite apparent that the company's first version of a sale process has gone nowhere, and a new sale alternative "is no more than a hopeful idea floated by the equity committee without established feasibility."

A hearing on the exclusivity extension is scheduled for Thursday.

Solutia, a St. Louis-based manufacturer and provider of performance films, specialty chemicals and an integrated family of nylon products, filed for bankruptcy on Dec. 17, 2003. Its Chapter 11 case number is 03-17949.

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